China Begins Picking Solar Winners and Losers

A $1 billion loan to a relatively small Chinese solar manufacturer may be a clue into how China will handle its solar shakeout.

Chinese solar manufacturers have been built on an unsustainable foundation of short-term debt from state-run banks. Companies like Suntech Power(NASDAQOTH:STPFQ), Yingli Green Energy(NYSE:YGE), Trina Solar(NYSE:TSL), and LDK Solar(NASDAQOTH:LDKSY) all have more than $1 billion in debt, an unsustainable amount for companies reporting massive losses.

But we may be seeing a peak into whom China will choose to emerge as a long-term winner, and what qualities it's looking for. Jinko Solar(NYSE:JKS) just received a $1 billion loan from the China Development Bank to build solar projects in Europe. The company had a 9.9% gross margin last quarter and less than $400 million in debt, both far better than most of the Chinese competition. So could Jinko be one of the few that survive?